Looming Home Buyer Tax Credit Deadline Triggers Surge in New Home Sales in March

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According to the National Association of Home Builders (NAHB), lots of buyers are rushing to take advantage of the federal home-buyer tax credit set to expire in April. Because of such, sales of newly built single-family homes surged 26.9 percent in March to a seasonally adjusted annual rate of 411,000 units, the Commerce Department reported today. Sales increases were posted in all four regions of the country.

"Undoubtedly, the tax credit is working," said Bob Jones, chairman of the National Association of Home Builders and a home builder from Bloomfield Hills, Mich. "Builders are seeing a growing optimism among consumers."

"The near record-breaking 27 percent increase over February was the result of home buyers taking advantage of the tax credit as well as a carryover of demand that was held back by unusually bad weather in February," said NAHB Chief Economist David Crowe.

"The increased sales are very welcome news and sales will continue to improve, although we expect them to plateau in late spring and early summer when the credit expires. Following that, the housing momentum will be carried forward by low interest rates, pent up household formations, excellent affordability conditions and a budding employment growth," Crowe added.

Regionally, sales increased 35.7 percent in the Northeast, 4.3 percent in the Midwest, 43.5 percent in the South and 5.7 percent in the West.

The nationwide inventory of new homes on the market dropped a negligible 0.8 percent in March, to 227,000 units as builders continued to maintain small inventories. With the increased sales pace and low inventory level, the month's supply of new homes for sale dropped from 8.6 in February to 6.7 in March.

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